Hilton Food boosted by seafood recovery

Hilton Food (HFG) served up strong profit growth in its annual results as the food packing business enjoyed a better-than-anticipated seafood arm recovery and a robust performance in its core meat business. 

The seafood business has been in recovery mode after being buffeted by inflation and price recovery headwinds, so the delivery of an annual operating profit was an important moment. The progress was reflected in a 60 basis point increase in the overall operating margin to 2.4 per cent. 

On the meat side of things, the partnership with Woolworths in APAC drove 7.2 per cent volume growth in that locale. This – and a full year of trading from salmon producer acquisition Foppen –helped total business volumes up 0.7 per cent, but this compared with growth of 4.3 per cent in the prior year as UK and Ireland and Europe volumes contracted. 

Management warned of continuing challenges for its vegetarian and vegan business Dalco as it pointed to "the structural market reset that has taken place in this sector" and confirmed it has consolidated the business into one operating facility. There has been much fanfare about non-meat product potential, but as the weak performance of Beyond Meat (US:BYND) has shown investors and consumers aren't fully convinced. Almost £2mn of impairment was recognised over Dalco assets, being the site closure and a computer software matter. 

The shares trade on an undemanding 14 times forward consensus earnings. As RBC Capital Markets analysts correctly point out, "the wisdom of the last few years of capital allocation has been debatable". But we are encouraged by the approach of new chief executive Steve Murrells, and the seafood turnaround is encouraging. Buy. 

Last IC view: Hold, 680p, 07 Sep 2023